Public Service Commission v. City of Indianapolis

• Decision Date: 22 December 1922
• Docket Number: 24,147
• Citation: 137 N.E. 705,193 Ind. 37
• Parties: Public Service Commission et al. v. City of Indianapolis et al
• Court: Indiana Supreme Court

137 N.E. 705

193 Ind. 37

Public Service Commission et al. v. City of Indianapolis et al

No. 24,147

Supreme Court of Indiana

December 22, 1922

Rehearing Denied March 27, 1923.

From Marion Superior Court (A15,615); Linn D. Hay, Judge.

Action by the City of Indianapolis and others against the Public Service Commission and others. From a judgment for plaintiffs, the defendants appeal.

Reversed.

U. S Lesh, Attorney-General, Mrs. Edward Franklin White, Deputy Attorney-General, Bell, Kirkpatrick & McClure, Charles McPherson, M. E. Nebeker, Haynes & Mote and Fesler, Elam & Young, for appellants.

Fred H Jessup, Fred Bates Johnson, Samuel Ashby, Taylor E. Groninger and B. C. Moon, for appellees.

Ewbank J. Willoughby, J., dissents.

OPINION

Ewbank, J.

Appellees sued to enjoin the appellant Indiana Electric Corporation from purchasing the property of each of seven public utility companies, its coappellants, on the terms and under the conditions fixed by an order of the Public Service Commission, at values found by the commission, and to enjoin the other seven companies from selling to it at those values and on those terms. A demurrer to the complaint was overruled, and appellants excepted, and upon their refusal to plead further, a judgment was rendered enjoining appellants from exercising any rights under the order in question, or doing any act or thing pursuant to the authority therein and thereby granted, or in any way enforcing such order, and commanding that appellants pay the costs. Overruling the demurrer to the complaint is the only error assigned.

All parties insist that this is a suit in chancery for an injunction against enforcing or obeying an order of the commission alleged to be void, and not an appeal from the order, both briefs pointing out that no appeal lies from an order of the Public Service Commission granting to a corporation permission to issue stocks and bonds, or fixing the price at which a public utility corporation may sell its property, or granting permission to one public utility corporation to sell to another. Public Service Commission v. State, ex rel. (1916), 184 Ind. 273, 282, 111 N.E. 10; State, ex rel., v. Lewis (1918), 187 Ind. 564, 120 N.E. 129, 132.

The complaint proceeds throughout on the theory of enjoining acts proposed to be done under an alleged void order of the commission, and not on the theory of an attempted appeal. Such a suit is a collateral attack upon the action of the commission, and can only succeed in case the order was wholly void, either because of fraud which entered into it, or because the commission was without jurisdiction, or exceeded its jurisdiction, in making such order. Southern Ind. R. Co. v. Railroad Commission, etc. (1909), 172 Ind. 113, 117, 118, 87 N.E. 966; Riverside Oil Co. v. Hitchcock (1903), 190 U.S. 316, 324, 325, 23 S.Ct. 698, 702, 47 L.Ed. 1074; People, ex rel., v. McCall (1916), 219 N.Y. 84, 87, 88, 113 N.E. 795, Ann. Cas. 1916E 1042; affirmed 245 U.S. 345, 347, 348, 38 S.Ct. 122, 62 L.Ed. 337; Pollitz v. Public Utilities Commission (1917), 96 Ohio St. 560, 118 N.E. 107; Utilities Commission v. Springfield Gas Co. (1919), 291 Ill. 209, 125 N.E. 891.

If the commission had jurisdiction and kept within it, and its action was not vitiated by fraud, its decision of all questions of fact as to the value of the properties, the sufficiency of the income to pay interest and dividends on the bonds and stock authorized, the petitioner's qualifications as a purchaser, and all other questions which it was required to decide as preliminary to taking action in the matter, is conclusive upon the courts in a collateral action. Sections 89, 90, 91 and 92 of the act creating the Public Service Commission (Acts 1913 p. 167, §§ 10052k3-10052n3 Burns 1914) were construed by this court in a recent decision as giving the commission power to hear and determine the facts in relation to a proposed issue and sale of stocks, bonds and other securities, but making its action mandatory if it found the existence of facts showing a necessity for issuing them.

The court said: "From the provisions of this act it is apparent that the Public Service Commission is required to hear and determine the facts upon which the application is based and the facts thus determined constitute the foundation upon which its order shall be based. If the facts thus found are such as to entitle the utility to a certificate of authority to issue and sell bonds in a given amount, it is the duty of the commission to issue such a certificate. * * * If the commission had found that the utility had expended $ 103,000 in extensions and improvement of its distributing system, and had also found that the instrumentalities acquired did not possess a money value in excess of $ 75,000 by reason of the fact that a large portion of the newly acquired instrumentalities constituted a duplication of other instrumentalities existing and in use by another public utility, a different question would have been presented. The order shows that the expenditure of $ 103,000 was made by the company for certain purposes and that the issue of bonds requested was to reimburse the company for the money expended for such purpose. There is no finding that the extensions and improvements for which the expenditure was had did not represent a money value to the utility of the full amount of their costs. * * * Under the facts found by the commission, this statute conferred upon appellee the right to receive at the hands of the commission a certificate of authority to issue bonds to the amount of $ 103,000." Public Service Commission v. State, ex rel., supra.

And it was held that a complaint alleging only that the relator company had applied for authority to issue and sell bonds to the amount of $ 103,000 and that the Public Service Commission, in passing upon its application, had found the facts to be as stated above, but that the order made upon those facts only authorized the issue of $ 75,000 of [137 N.E. 708] bonds, stated a cause of action against the commission for a writ of mandamus to compel the grant of authority to issue $ 28,000 more. Public Service Commission v. State, ex rel., supra.

Under the rule thus declared, if the Public Service Commission, upon conflicting evidence as to the values of the different properties in question, decided that they were of the values set out in its finding, in the aggregate amount of $ 17,500,000, as stated in the finding and supplemental finding recited in the complaint, such finding is conclusive on the court and the law as applied to those facts must determine the rights of appellees, unless the commission was without jurisdiction or its finding was vitiated by fraud.

The facts alleged in the complaint on which counsel for the appellees rely as charging fraud are that the proposed purchaser, Indiana Electric Corporation, and three of the seven companies whose properties it asked authority to buy, have the same president and are "owned and controlled by the same interests," and that said owners own all the stock of two holding companies that own all the stock of those three selling companies; with the further alleged facts that the aggregate value of the property proposed to be purchased (appellant's say) is only $ 10,300,000, while the commission found its value to be $ 17,500,000, and authorized the issue of stocks and securities in that amount to pay for it. It does not appear but that all owners of stock in both selling and purchasing corporations may have the same proportionate interest in one as in the other, and all may be consenting to the purchase.

That two corporations have a majority or the whole membership of their boards of directors in common does not necessarily render transactions between them void, in the absence of other facts showing fraud even as against stockholders, especially where the stockholders consent to all that is done. Kidd v. Trust Co. (1909), 75 N.H. 154, 71 A. 878; Blum v. Whitney (1906), 185 N.Y. 232, 77 N.E. 1159; Evansville Public Hall Co. v. Bank of Commerce (1896), 144 Ind. 34, 42 N.E. 1097; 3 Cook, Corporations (7th ed.) § 658.

And it is not the purchase price of its properly alone which will determine the rates to be charged consumers by a public utility, the question whether or not the rates charged are unreasonable being subject to investigation and review by the Public Service Commission at any time. Acts 1913 p. 167, §§ 57-72, §§ 10052e2-10052t2 Burns 1914.

The order of the Public Service Commission attacked by the complaint in this case expressly provides: "That the value found for the purpose of purchase and sale and the issuance of securities shall in no wise be considered as a finding or indication by the Commission of the value of the constituent properties for rate-making purposes * * * and the Commission stipulates that any finding of a fair value of the property of the Indiana Electric Corporation for purposes of rates which it may make in the future will be made and determined entirely independent of and unaffected by its finding herein," and that such finding shall not affect rates to be established in the future.

Whatever else may be said or thought of this finding, it certainly will preclude appellant's from setting up this valuation as the basis for charging excessive rates, to defraud the residents in the appellee cities. The complaint does not state the character of the property to be purchased, and, so far as appears, half of it may not now be in actual use in serving the public. And the value of property not used for that purpose would not be a factor in determining the rates for service until and unless it shall be so used. The cost of operation is influential in determining the rates to be charged, and...